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Black Businesses Object to MBE Status for Not-for Profits

Legislation being considered in Maryland’s House of Delegates that would remove non-profits from the Minority Business Enterprise procurement program has gained momentum with support from the Governor’s Office of Minority Affairs and minority-owned businesses.

“The overall African-American business community is behind this,” said Calvin Mims, president of Calmi Electrical Co., on behalf of the Presidents’ Roundtable, a consortium of Black business owners.

In fact, he said, it was the minority business community who brought the concern to the attention of Del. Barbara Robinson (D-Baltimore), who sponsored the bill, HB 48.

The state lawmaker said not-for-profits should never have been designated as MBEs since they don’t meet the legal standard.

“The definition of minority businesses says they have to be 51 percent owned or controlled by a woman, African American, Asian, Hispanic or disabled person.

The operative words are ‘owned and controlled.’ Non-profits are always under the control of a board of directors,” she said. “[Therefore], there should be a clear delineation between non-profits and minority business in terms of contract procurement…and never the two should meet.”

That faulty designation, “really skews the number that the state proclaims for MBE participation,” Mims said.

For example, in 2011, if Maryland had not counted certified non-profits and community service providers it would not have met its 25 percent MBE goal requirement, but only 18 percent, according to the bill’s fiscal notes. In all, those not-for-profits accounted for 29.1 percent of contracts awarded under the MBE program.

Robinson said not only would her legislation offer a truer picture of MBE participation, but it also creates some parity between non-profits and for-profit entities in terms of competing for government contracts, since non-profits have some built-on advantages.

“If there is a government contract available, a non-profit can bid significantly lower than a minority business because a non-profit, for example, does not have to put in an amount for administrative fees—someone can donate office space to them and get it as a tax write-off,” she said. “Also, the business has to include a profit margin in their bid, while a non-profit does not.”

Responses to this bill—which failed in previous incarnations—have been mixed. But, GOMA has met with stakeholders, including non-profits, to explain that this bill would not adversely impact their procurement dollars. In fact, non-profits can participate in Preferred Provider, a set-aside program specifically aimed at non-profits.

“At first there was strong opposition from non-profits but now they see it’s not an effort to push them out, but to level the playing field,” Robinson said.

The AFRO reached out to Blind Industries and Services of Maryland, a non-profit that has voiced some resistance to the bill. But, a spokesman said the organization would withhold comment since its president was unavailable.

Meanwhile, Black businesses say that if passed, HB 48 would be a great boon to their community.

“If this bill is passed, state agencies will actually have to do the work and reach out to true minority businesses to reach their MBE goals, which means more revenue for Black businesses.”